Banco Santander Chile SA Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Chile First Strategy: Four pillars include transforming into a digital bank with Work Cafes (38% of branches without human tellers), providing specialized value-added services, fostering innovation, and building a high-performing culture.
• Digital Progress: 4.2 million total clients, 2.1 million digital clients, growth in products like Santander Life and Mas Lucas accounts. Client satisfaction high with Net Promoter Score leading the industry.
• Getnet Performance: Launched in 2021, generated ₱55B in fees YTD, 277k merchants, 41% market share in current accounts, expanding to larger clients.
• Macroeconomic Outlook: Chilean GDP growth forecast, inflation expected to close 2024 at 4.3%, Central Bank rate cuts, exchange rate trends.
• Regulatory Updates: Tax Compliance Law, pension reform in discussion, open finance system rule effective July 2026.

Segment Performance

• Loan Book: Retail loans grew steadily with consumer and mortgage loans, while commercial loans contracted due to consolidation perimeter change and slower economic activity. Adjusted for deconsolidation, loan book grew ~2% y-o-y. Mortgage loans grew 0.5%, consumer lending showed positive trends.
• Net Interest Margin: Q3 2024 net interest margin was 3.9%, YTD 3.4%. Net interest income grew 74.8% y-o-y,受益于资金成本下降。
• Fee Income: Increased 8.3% q-o-q and 5.4% y-o-y (excluding ~₱25B impact from interchange fee cap), driven by client acquisition and product usage.
• Asset Quality: NPLs and impaired ratios rising, cost of risk ~1.3% including a one-time provision. Mortgage and commercial loans affected, but consumer loans performed well with NPLs stabilizing.

Guidance

• 2024: Updated ROE guidance to 18%-19%, net interest margin range 3.4%-3.5%, loan growth mid-single digits. Fee growth high single digits excluding interchange fee impact.
• 2025: Loan growth mid-single digits, net interest margin high 3s, cost of risk ~1.3%, ROE expected 18%-20%.

Risks

• External: Geopolitical tensions, oil and copper prices impacting macroeconomic scenario.
• Internal: Asset quality fluctuations, regulatory changes affecting capital requirements, labor market conditions impacting mortgage and commercial loans.

Question and Answer

Q: Regarding payout and asset quality. How does payout align with growth and ROE? What's the coverage level for asset quality?

A: Patricia stated capital is well above minimum requirements, maintaining 70% dividend payout in line with historical. Cristian mentioned asset quality NPLs around 3%, with some stabilization in commercial loans, coverage varies by portfolio (consumer ~350%, commercial above 100%).

Q: On loan growth outlook for 2025. Why mid-single digit growth? What drives segment-wise growth?

A: Cristian said loan growth depends on economic cycle, with consumer and retail SMEs showing recovery, but large corporate demand not yet visible. Expect mid-single digit growth, possibly slightly higher.

Q: Headwinds to ROE and digital competition. What risks affect ROE? How does Santander differentiate digitally?

A: Patricia cited external factors like geopolitical tensions and oil prices. Cristian mentioned Santander's first-mover advantage in digital onboarding, investment in core banking system update, and leveraging cross-selling capabilities as advantages over competitors.